The Central Bank of Nigeria (CBN) has set new rules on how banks can access loans from its discount window on auction days.?
The new rules are contained in a circular released at the weekend and signed by CBN Director of the Financial Markets Department, Mrs. Angela Sere-Ejembi.
The CBN discount window includes the Standing Lending Facility (SLF), the Automated Repo Conversion (AREPO), the Funding for Liquidity Facility (FfLF), and the Tenored Repurchase Transactions (REPO).
The SLF is an overnight CBN credit available on banking days between 2 p.m and 3.30 p.m, with settlement done on same day value.
Funds were sourced mainly from time, savings and foreign currency deposits, as well as accretion to unclassified assets.
But the apex bank has now directed banks to refrain from accessing its discount window on the settlement date for government securities auctions.
It complained about non-adherence to the provisions of the previous instructions on the discount window, hence the new directive.
The CBN said: “Open Market Operations: Participants with successful bids at the Open Market Operations (OMO) auctions are to refrain from accessing the discount window on the auction date. Failure to comply shall result in the reversal of allotment.”
The apex bank added: “Government Securities: Participants with successful bids at the government securities auctions such as Nigerian Treasury Bills (NTBs), Federal Government of Nigeria (FGN) Bonds and Sukuk are not permitted to access the CBN discount window on the settlement date.
Requests for SLF, FfLF, and REPO on the settlement date will not be permitted.
A REPO and conversion of Intraday Liquidity Facility (IDF) to FfLF on the settlement date, as well as running REPO shall attract a penal charge of five percent (5 per cent) flat on the allotment value.
It explained that market players with successful foreign exchange bids and transactions are not allowed to use the discount window on the dates of the auction and the transaction settlement.
The apex bank said: “Foreign Exchange: Participants with successful foreign exchange bids and transactions are not to access the discount window on both auction and transaction settlement dates.
“Failure to comply shall result in the cancellation of the bids or transactions. This circular takes immediate effect. All authorised dealers are hereby required to comply accordingly.”